LIBRARY 

OF  THE 

University  of  California, 


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n  Address  on 

^he  Qommerdal  Aspects 

of 

\Federal  Regulation 
i  Insurance 


By  JOUn  F.  DRYDEN,  President  of  The  Prudential  Insurance  Gompany 
\of  America,    Delivered  at  the  Thirty-eighth  Anniversary  Banquet  of 
[the  Newark  Board  of  Trade,  January  18,  1906 


An  Address  on 

The  Commercial  Aspects  of  Federal 

Regulation  of  Insurance 


By  JOHN  F.  DRYDEN, 

President  of 
The  Prudential  Insurance  Company  of  America 


Delivered  at  the  Thirty-eighth  Anniversary  Banquet  of  the 
Newark  Board  of  Trade,  January  i8,  1906 


THE  COMMERCIAL  ASPECTS   OF  FEDERAL 
REGULATION  OF  INSURANCE. 

A  National  The  proper  supervision,  regulation  and  control  of 

Problem.  insurance  companies  have  become  problems  of  national 

importance,  chiefly  because  of  the  enormous  extent  of  the  business 
and  the  fact  that  the  contracts  are,  in  the  majority  of  cases, 
made  by  parties  resident  in  one  State  with  parties  resident  in 
another.  There  has,  therefore,  come  about  a  perfectly  natural 
demand  that  insurance  companies  should  be  made  subject  to  the 
restrictive  power  and  general  supervision  of  the  Federal  govern- 
ment, in  much  the  same  manner  as  the  Federal  government  exercises 
control  over  national  banks  and  railways  engaged  in  interstate 
commerce.  The  proposition  appeals  with  peculiar  force  to  commer- 
cial interests,  since  in  one  way  or  another  insurance  enters  into  all 
of  our  commercial  transactions  and  forms  a  substantial  item  of 
expense  in  every  mercantile  account.  Insurance  constitutes  a  part 
of  the  price  of  nearly  every  article  sold  for  public  consumption,  and 
while  the  unit  cost  is  infinitesimal,  in  the  aggregate  the  amount  paid 
out  for  fire,  marine,  inland  and  miscellaneous  insurance  amounts  to 
about  three  hundred  and  fifty  million  dollars  per  annum — a  not 
inconsiderable  burden  upon  our  commerce,  both  at  home  and 
abroad.  Insurance,  in  other  words,  is  a  factor  in  commerce  and 
peculiarly  a  mercantile  interest,  and  in  whatever  way  the  business 
can  be  advanced,  the  cost  reduced  and  the  security  made  more 
safe,  concerns  all  who  are  engaged  in  commerce,  transportation  or 
mercantile  transactions  generally. 


Necessity  for  For  some  ycars  efforts  have  been  made  to  secure 

Federal  Laws.  £^^  insurance  adequate  and  uniform  national  laws  along 
the  same  line  as  has  been  the  case  in  interstate  commerce 
generally,  in  national  banking,  and  since  1898  in  bankruptcy. 
In  the  last  Congress  I  introduced  a  bill  to  this  effect,  but  only  to 


174424 


secure  for  it  a  public  expression  of  opinion  as  to  its  merits.  The 
new  bill*  introduced  by  me  this  week  is  a  modified  and  materially 
improved  measure,  which,  if  passed,  will  extend  to  the  insurance 
business  the  full  scope  and  power  of  Federal  laws.  After  carefully 
considering  the  subject  for  many  years,  both  in  the  light  of  theory 
and  large  practical  experience,  I  have  become  convinced  that 
legislation  of  this  character  is  demanded  by  the  necessities  of  our 
national  growth  and  progress  in  industry  and  commerce,  and  that 
what  is  to-day  a  vast  business  of  national  extent  is,  as  such,  entitled 
to  the  protection,  care  and  solicitude  of  the  Congress. 


Our  It  is  difficult  to  realize  the  immense  growth  and 

Commercli  ~ 
Progress. 


commerc  profound  changes  in  our  position  as  a  commercial  nation 


during  recent  years  without  the  trying  aid  of  a  mass  of 
statistical  data  which  would  be  out  of  place  on  this  occasion.  In  a 
general  way,  however,  I  may  point  out  that  this  country  is  to-day 
different  in  all  essentials,  save  our  fundamental  political  principles, 
from  what  it  was  at  the  time  when  the  Constitution  was  adopted. 
In  1790  our  population  was  four  millions,  as  contrasted  with  more 
than  eighty  millions  at  the  present  time.  In  1790  the  aggregate 
value  of  our  exports  was  estimated  at  $20,000,000,  or  a  per  capita 
of  about  $5,  in  contrast  with  which  we  now  export  about  $1,500- 
000,000  per  annum,  or  $18  per  capita.  The  adoption  of  the  Con- 
stitution not  only  made  us  a  nation,  but  stamped  upon  us  our 
commercial  character,  and  the  destiny,  in  due  course  of  time,  to 
attain  to  the  leading  position  in  the  world  of  commerce,  trade  and 
industry.  Chiefly,  however,  our  growth  has  been  in  the  direction 
of  internal  development,  and  our  inland  trade  and  general  business 
to-day  is  of  vastly  greater  proportions  than  both  our  exports  and 
imports  combined.  At  the  time  of  the  constitutional  convention 
there  were  no  railways,  no  canals  of  commercial  value,  hardly  any 
wagon-roads  connecting  one  State  with  another,  no  business  corpor- 
ations of  importance,  and  no  insurance  companies  or  insurance  busi- 
ness in  the  sense  and  to  the  extent  as  that  term  is  now  under- 
stood in  everyday  language  and  as  established  by  commercial  custom 
and  usage.  The  times  and  conditions  have  changed,  and,  of 
necessity,  our  earlier  restricted  policy  has  been  replaced  by  a 
broad  conception  of  national  interest  and  national  expansion. 

*  Senate  3026,  59th  Congress,  ist  Session,  January  15,  1906. 

4 


Insurance  a  With   the    era  of   internal   improvements    (1806) 

Ne^ssir*  commenced  our  internal  expansion  and  development, 
until  the  United  States  of  to-day  is  an  imperial  domain 
with  more  productive  wealth  per  capita  and  a  more  general  method 
of  distribution  than  any  other  country  in  the  world.  By  1800  only 
nine  hundred  and  three  post-offices  had  been  established,  with  an 
annual  revenue  of  $280,000,  while  to-day  there  are  some  seventy- 
five  thousand  offices,  with  an  annual  revenue  exceeding  $150,- 
000,000.  There  was  then  no  telegraph,  which  to-day  sends  out 
over  one  hundred  million  messages  per  annum,  and  no  telephone, 
the  general  utility  of  which  can  neither  be  expressed  in  figures 
nor  computed  in  monetary  equivalents.  There  was  then  but 
the  very  beginning  of  insurance,  which  to-day  is  the  foremost 
single  financial  interest  in  this  land.  Marine  insurance  was  the 
first  to  become  a  commercial  necessity,  perhaps  more  so  at  that 
time  than  the  present  on  account  of  the  great  development  of  steam 
navigation,  the  more  accurate  charting  of  the  coast,  resulting  in  a 
lesser  number  of  shipwrecks,  the  extension  and  perfection  of  our 
magnificent  lighthouse  service,  and,  last  but  not  least,  a  more 
intelligent  and  efficient  pilotage.  Fire  insurance  followed,  and 
soon  became  recognized  even  by  moralists  as  a  duty  incumbent 
upon  the  debtor  to  fully  protect  the  interest  of  the  creditor. 
Without  fire  insurance  protection  the  world's  inland  commerce 
could  not  be  carried  forward  to-day  on  anything  like  the  existing 
scale,  nor  would  it  be  possible  to  secure  the  vast  amount  of  mortgage 
indebtedness  at  the  low  prevailing  rates  of  interest.  While  it  is 
true  that  a  considerable  part  of  our  inland  commerce  as  such  is  not 
specifically  protected  by  insurance,  an  open  policy  of  insurance,  as 
a  rule,  protects  the  carrier,  who  assumes  the  responsibility  to  the 
shipper  in  the  event  of  loss.  In  all  our  immense  warehouse  and 
elevator  transactions  the  policy  of  fire  insurance,  is  as  much  a 
necessity  as  the  certificate  establishing  the  ownership  of  the  goods 
in  storage  or  awaiting  shipment.  In  addition  to  these,  numerous 
other  forms  of  insurance  have  been  developed,  all  of  which  have 
become  a  more  or  less  indispensable  aid  to  commerce  and  industry. 
Among  these  I  may  mention  fidelity  and  surety,  employers'  liability, 
plate-glass,  credit  and  general  accident  insurance.  All  of  these 
forms  of  insurance  protection  reduce  the  element  of  uncertainty  in 
commercial  operations  and  increase  commercial  efficiency,  and 
directly   or   indirectly,    as   the   case   may   be,    increase   to   a   con- 


siderable   extent   our  commercial   expansion   both    at    home    and 
abroad. 


Early  This  point  of  view  is  not  new,  but  nearly  as  old  as 

Insurance 
Problems. 


Insurance         ^^^  business  of  insurance  itself,  and  commercial  losses 


due  to  fire,  shipwreck  and  other  casualties  are  no  longer 
met  by  general  charitable  contributions,  but  the  reimbursement  for 
such  losses  is  made  through  associated  effort  represented  by  corpor- 
ations transacting  the  business  of  insurance.  As  earlj^  as  1796  this 
aspect  of  the  insurance  problem  was  brought  to  the  attention  of  Con- 
gress in  an  attempt  to  secure  pecuniary  relief  for  the  sufferers  from  a 
great  conflagration  which  destroyed  the  larger  portion  of  the  city  of 
Savannah.  It  was  urged  in  the  argument  in  favor  of  the  plea  that 
not  a  public  building,  not  a  place  of  public  worship  or  of  public 
justice  remained,  that  all  was  a  wide  waste  of  ruin  and  desolation, 
and  the  speaker  expressed  the  hope  that  some  relief  would  be 
afforded  to  the  city  in  its  unexampled  distress.  In  reply,  however, 
it  was  said,  and  very  properly  so,  that  if  Congress  were  to  set  a 
precedent  in  this  direction  and  accustom  the  public  to  rely  upon  the 
national  legislature  for  relief  in  cases  of  this  kind,  there  would 
neither  be  any  occasion  for  insurance  companies  nor  any  induce- 
ment to  improve  the  methods  of  building.  This,  I  think,  is  the 
first  reference  to  insurance  in  the  debates  of  Congress. 

Insurance  not  Under  modern   conditions   insurance   has   become 

Na^onai*  ^   necessity,    for   individual  protection  or   that  of  the 

family  can  no  longer  be  left  to  friends  and  relatives, 
with  burdens  enough  of  their  own,  but  the  risk  inherent  in  the 
uncertainty  of  human  existence  must  be  and  is  assumed  by  corpor- 
ations engaged  in  the  business  of  insurance.  Contracts  made  to 
this  effect  with,well  established  companies  are  carried  out  to  the 
letter,  and  very  often  beyond  the  letter  of  the  mere  written  agree- 
ment between  the  insurer  and  the  insured.  In  whatever  respect 
insurance  management  may  have  failed  to  meet  the  highest  expec- 
tation or  the  most  severe  test  of  public  criticism,  it  is  something 
very  considerably  to  the  credit  of  American  insurance  companies 
that  on  the  whole  and  with  no  important  exceptions  they  should  so 
successfully  have  met  their  contract  obligations  dollar  for  dollar, 
not  only  to  the  letter  of  the  law,  but  in  a  spirit  of  justice  and  fair 
dealing  to  the  insured.     It  is  due  to  this  fact  that  insurance  has 


become  a  national  interest,  now  including  practically  every  sphere 
of  human  activity,  every  branch  of  trade  and  industry,  every  line  of 
progress  and  advancement,  of  which  this  nation,  at  a  more  rapid 
rate  than  any  other,  has  forged  its  way  to  the  foremost  position 
among  the  civilized  countries  of  the  world.  Insurance  to-day  is 
not  a  local  interest  in  the  sense  that  this  word  is  used  in  ordinary 
English,  but,  on  the  contrary,  it  is  an  interstate  or  national  interest 
in  the  vast  majority  of  the  transactions  which  are  carried  on  between 
the  companies  and  the  policyholders. 


Insurance  in  All  of  the  large  companies  are  practically  national 

Interstate 
Commerce. 


Interstate         -^  ^-j^^  extent  of  their  operations,  transacting  business 


in  every  State  and  Territory  of  the  Union,  and  this 
because  of  modern  necessities  and  not  merely  as  a  matter  of  profit- 
able business  extension.  Goods  shipped  from  Duluth  or  St.  lyouis 
to  the  seaboard  to  be  transshipped  to  foreign  ports  are  covered  by 
a  single  policy  of  insurance  which  begins  from  the  time  of  shipment 
in  the  West  to  the  time 'the  goods  are  delivered  in  foreign  lands. 
This,  in  the  case  of  marine  insurance,  not  only  makes  the  business 
national  but  international,  and,  as  such,  peculiarly  a  subject  of 
Federal  supervision  and  control.  Another  element  which  enters 
into  the  problem  and  which  has  often  been  ignored,  is  the  fact  that 
our  population  is  largely  of  a  migratory  character,  and  people  in- 
sured in  one  State,  by  removing  to  other  States,  while  continuing 
their  contracts  under  existing  conditions,  become  subject  to  different 
laws,  and  often  to  a  radically  different  interpretation  of  the  law. 

Insurance  in  Insurance  is  not  a  subject  which  should  be  exposed 

LawT"  ^  ^^  *^^  fluctuating  state  of  public  opinion  as  expressed 
in  the  form  of  frequent  statutory  enactments  under  our 
system  of  representative  government  in  some  fifty  different  States 
and  Territories.  In  conformity  with  the  usage  of  other  commercial 
nations,  it  should  be  exclusively  within  the  control  of  the  State  of 
incorporation  and  the  Federal  government.  This  control,  I  am 
convinced,  will  be  effective  and  economical  and  produce  a  far 
better  state  of  affairs  than  exist  at  the  present  time.  I  have 
it  on  good  authority  that  during  the  last  five  years  not  less  than 
three  thousand  bills  were  introduced  into  the  different  State  legis- 
latures more  or  less  affecting  the  interests  of  insurance  companies. 
This  amount  of  legislation  and  remedial  legislative  action  is  utterly 


uncalled  for  and  neither  demanded  by  the  growth  of  the  business 
nor  by  the  contractual  relations  between  the  companies  and  their 
policyholders.  In  other  countries,  such  as  Germany  and  Switzer- 
land, where  an  earlier  federation  of  states,  or  cantons,  had  produced 
conditions  similar  to  those  existing  in  this  country  to-day,  in  the 
course  of  time  insurance  has  become  the  subject  of  exclusive 
federal  control. 

Federal  My  vicws  and  convictions  in  this  matter  have  not 

and^Pubiic"  wholly  been  the  result  of  my  personal  experience  in  the 
Opinion.  business  of  insurance.     To  satisfy  myself  fully  as  to 

whether  my  own  views  were  sustained  by  those  whose 
business  experience  or  personal  interest  in  public  affairs  had  given 
them  a  peculiar  opportunity  to  judge  of  the  necessity  and  advantage 
of  Federal  supervision  of  insurance,  I  addressed  a  carefully  framed 
circular  to  some  eight  thousand  associations  and  individuals  in  all 
parts  of  the  United  States,  and  of  these  I  am  now  in  a  position  to 
state  that  nearly  ninety  per  cent,  favor  the  idea,  and  heartily 
endorse,  often  by  long  letters,  the  effort  to  secure  congressional 
action  upon  this  subject. 

Federal  My  letter  of  inquiry  was  addressed,  among  others, 

and*coinmer=  *°  some  scvcn  hundred  commercial  bodies  or  organiza- 
dai  Opinion,  tions,  and  of  this  number  ninety-six  per  cent,  pro- 
nounced themselves  in  favor  of  Federal  supervision. 
In  many  instances  deliberate  action  was  taken  upon  the  matter  and 
a  formal  expression  of  all  the  members  of  the  organization  was 
secured,  emphasizing  the  widespread  interest  in  the  subject  and  the 
deep  conviction  that  Federal  action  upon  this  matter  would  be  desir- 
able and  would  be  approved  by  the  public  generally.  Hence,  I  have 
fully  satisfied  myself  that  the  commercial  interests  as  represented  in 
well-established  associations  or  organizations  are  practically  a  unit 
in  favor  of  the  proposed  regulation  of  insurance  by  Congress.  As 
to  the  further  question,  whether  insurance  should  properly  be  con- 
sidered an  element  or  instrumentality  of  commerce,  eighty  per  cent, 
of  the  commercial  bodies  to  whom  the  circular  was  addressed 
replied  in  the  affirmative.  I  also  addressed  my  inquiry  to  a  large 
number  of  the  presidents  of  national  banks,  upon  the  theory  that 
these  institutions,  having  for  many  years  been  under  Federal  super- 
vision and  control,  were  in  an  exceptional  position  to  express  an 

8 


opinion  as  to  whether  Federal  regulation  of  insurance  would  be 
desirable  or  not.  In  addition,  it  must  be  taken  into  consideration 
that  these  banks,  in  a  general  way,  are  interested  in  insurance  to 
the  extent  that  many  loans  upon  goods  in  transit  or  in  storage 
require  the  additional  guarantee  of  a  certificate  of  insurance  before 
the  loan  will  be  granted  or  an  advance  will  be  made  by  the  bank. 
Of  those  making  answer  to  my  letter  of  inquiry,  ninety-one  per 
cent,  of  the  bank  presidents  were  in  favor  of  Federal  regulation  of 
insurance,  while  seventy-two  per  cent,  held  insurance  to  be  com- 
merce or  an  element  or  instrumentality  thereof. 

Federal  Super-  These  are  but  a  few  illustrations  of  the  expression 

Folic" hoiderg'  ^^  public  Opinion  which  I  have  collected  to  satisfy  myself 
Opinion.  and  others  that  the  movement  for  Federal  regulation  of 

insurance  is  a  national  one  and  has  the  hearty  and 
emphatic  support  of  the  interests  specifically  affected,  as  well  as  of 
the  large  mass  of  our  population  generally.  I  may  add  that  of  a 
large  number  of  prominent  policyholders,  holding  life  insurance 
policies  of  not  less  than  $25,000,  and  in  the  aggregate  approx- 
imately $75,000,000  of  insurance,  and  being  therefore  vitally  and 
financially  interested  in  all  that  pertains  to  the  solvency  and 
economical  management  of  the  companies,  ninety-two  per  cent, 
expressed  themselves  in  favor  of  Federal  regulation  of  insurance, 
while  eighty  per  cent,  of  this  class  held  insurance  to  be  commerce 
or  an  instrumentality  thereof.  I  am,  therefore,  not  aware  of 
any  measure  which  may  come  before  Congress  for  serious  and 
earnest  consideration  which  has  so  fully  and  heartily  the  endorse- 
ment of  intelligent  public  opinion.  And  I  do  not  hesitate  to  say 
that  it  is  my  belief  that  if  the  proposition  could  be  submitted  to  a 
popular  vote,  and  if  an  expression  of  opinion  could  be  secured  from 
the  vast  mass  of  policyholders  of  all  branches  of  insurance,  the 
verdict  would  be  practically  unanimous  in  favor  of  the  enactment  of 
a  Federal  law  regulating  interstate  insurance  transactions. 

Constitutional  Any  new  legislative  proposition  must,  as  a  matter 

Obstacles.  ^£  coursc,  be  framed  or  designed  to  stand  the  final 
test  of  constitutionality  when  interpreted  by  our  court  of  last 
resort.  Some  very  plausible  reasons  have  been  advanced  to 
show  that  the  proposed  Federal  regulation  of  interstate  insurance 
transactions  would  not  be  within  the  powers  granted  by  the  Con- 


stitution,  and  in  particular  not  within  the  meaning  of  the  commerce 
clause  of  that  instrument.  Objections  of  this  kind  are  properly- 
entitled  to  serious  consideration,  but  it  is  well  to  keep  in  mind  that 
similar  objections  have  been  raised  against  most  of  the  great 
measures  which  have  come  before  Congress  for  consideration  at 
nearly  every  session  from  the  very  foundation  of  our  government. 
Nor  could  it  well  be  otherwise.  The  Constitution  is  not  a  legal 
code  but  a  written  instrument,  general  in  its  terms,  every  provision 
of  which  is,  and  will  ever  remain,  subject  to  interpretation  by  the 
Supreme  Court  as  cases  or  conditions  arise  which  may  make  this 
necessary.  The  Constitution  is  intended  to  endure  and  meet  our 
needs  for  all  time,  and  from  Marshall  down,  the  interpretation 
of  the  different  clauses  has,  as  a  rule,  been  in  a  spirit  of  broad 
construction,  to  give  to  this  government  the  character  of  a  nation 
and  not  merely  that  of  a  federation  of  States. 

Constitutional  Constitutional   objections,    as    I    have    said,    have 

History.  been  raised  against  most  of  the  measures  and  legislative 

acts  which  have  received  consideration  by  Congress  and  to  which 
we  owe  our  growth  and  development  as  a  nation.  Washington 
had  hardly  issued  his  famous  declaration  of  neutrality,  which, 
without  doubt,  saved  this  country  from  a  disastrous  war,  when 
bitter  accusations  were  made  against  him  of  an  unwarranted  exer- 
cise of  his  powers.  Washington  was  opposed  by  Madison  but  sus- 
tained by  Marshall,  and  the  verdict  of  history  is  read  in  the  language 
of  Justice  Story,*  that  "  Probably  at  the  present  day  (1835)  not  a 
single  statesman  can  be  found  of  any  influence,  in  any  party,  who 
does  not  deem  the  measure  to  have  been  as  well  founded  in  consti- 
tutional law  as  in  sound  policy. ' '  Jay  had  not  more  than  completed 
his  treaty  with  England  when  the  point  was  raised,  and  sustained 
by  apparently  irrefutable  arguments,  that  the  treaty  was  unconsti- 
tutional and  that  Congress  did  not  have  the  power  to  ratify  it.  In 
fact,  it  was  maintained  that  * '  The  negotiation  of  a  commercial 
treaty  by  the  Executive  was  an  infringement  of  the  Constitution 
and  a  violation  of  the  power  given  to  Congress  to  regulate  com- 
merce." In  all  the  many  and  perplexing  questions  which  have 
agitated  our  nation  from  time  to  time,  the  point  of  constitutionality 
in  legislative  enactments  has  invariably  been  brought  forward.  This 

♦John  Marshall,  lyife,  Character  and  Judicial  Services,  by  John  F.  Dillon,  Vol.  Ill, 
pp.  350-353- 

10 


is  true,  for  illustration,  of  the  controversy  relating  to  the  assumption 
of  State  debts,  the  several  embargo  acts,  the  enforcement  act,  the 
bank  charter,  the  militia  question,  the  territorial  extension  and  the 
creation  of  new  States,  the  conscription  scheme,  and  many  other 
controversies  and  disputes.  The  point  of  constitutionality  was 
raised  in  the  Missouri  compromise,  and  not  settled  by  a  decree  of 
the  Supreme  Court  until  thirty-five  years  later.  The  great  question 
of  internal  improvements,  than  which,  perhaps,  not  one  during  the 
earlier  years  of  our  national  existence  was  of  greater  importance, 
was  bitterly  fought  upon  the  ground  of  constitutionality,  and  had 
the  narrow  spirit  of  constitutional  construction  been  successful  we 
should  be  very  far  from  having  attained  to  our  present  imposing 
position.  Bitter,  again,  was  the  constitutional  struggle  over  the 
tariff  laws,  which,  it  was  held,  should  be  passed  solely  for  the 
purpose  of  raising  revenue  and  not  for  the  purpose  of  protection, 
but  fortunately  for  the  best  interests  of  the  people  and  the  nation, 
the  narrow  spirit  was  set  aside  by  the  broad  principles  of  liberal 
construction  of  the  constitution  as  an  instrument  designed  to  meet 
our  needs  as  a  nation  and  not  merely  as  a  federation  of  States. 

Supreme  Similar  constitutional  objections  have  been  raised 

Decisions  against  the  enactment  of  a  Federal  insurance  law.     It  is 

pointed  out  that  there  have  been  a  number  of  decisions 
of  the  Supreme  Court  to  the  effect  that  insurance  is  not  commerce 
and  that,  therefore.  Congress  has  no  power  over  interstate  insurance 
transactions.  The  fact  is  overlooked,  or  not  fully  considered,  that 
the  subject  has  never  been  presented  to  the  Court  upon  an  issue 
raised  under  a  Federal  statute,  and  that  the  cases  which  have  been 
decided  have  only  an  indirect  bearing  upon  the  point  in  view,  and 
do  not  warrant  a  negative  policy  of  action  on  the  part  of  Congress 
any  more  than  corresponding  objections  have  prevented  action  in 
other  cases.  The  Supreme  Court  itself  would  not  render  an  advance 
opinion  upon  the  subject,  so  it  can  not  be  held  to  be  the  duty  of  a 
member  of  Congress  to  be  influenced  by  mere  theoretical  speculations 
of  lawyers  and  laymen. 

Constitutional  As  a  matter  of  fact,  it  is  a  well-established  pnnciple 

ttons!**^^**'        of  the  j  udiciary  department  that  * '  Every  statute  is  con- 
sidered valid  as  long  as  there  is  any  reasonable  inter- 
pretation by  which  it  may  be  held  so.     The  Legislature  is  presumed 

II 


to  have  acted  within  its  powers,  and  only  the  strongest  proofs  to  the 
contrary  are  sufficient  to  nullify  its  act.  Congress  must  wantonly 
go  very  far  outside  the  plain  meaning  of  the  Constitution  before  the 
Court  will  interfere  to  prevent  the  operation  of  the  law."  In  the 
case  of  Fletcher  vs.  Peck  (6  Cranch,  87),  Marshall  stated  the  pre- 
ponderance of  proof  which  shall  be  necessary  to  j  ustify  the  Court  in 
ignoring  an  Act  of  the  Legislature.  He  said:  "The  question, 
whether  a  law  be  void  for  its  repugnancy  to  the  Constitution,  is  at 
all  times  a  question  of  delicacy,  which  ought  seldom,  if  ever,  to  be 
decided  in  the  affirmative  in  a  doubtful  case.  The  Court,  when 
impelled  by  duty  to  render  such  a  judgment,  would  be  unworthy  of 
its  station  could  it  be  unmindful  of  the  solemn  obligations  which 
that  station  implies.  But  it  is  not  on  slight  implication  or  vague  con- 
jecture that  the  Legislature  is  to  be  pronounced  to  have  transcended  its 
powers,  and  its  acts  to  be  considered  as  void.  The  opposition  between 
the  Constitution  and  the  law  should  be  such  that  the  judge  feels  a 
clear  and  strong  conviction  of  their  incompatibility  with  each  other. ' ' 

Facts  vs.  Now,  I  would  be  unmindful  of  my  own  duty  in 

this  respect,  and  my  own  sacred  oath  of  office  to 
support  the  Constitution,  if  I  had  not  made  every  reasonable 
effort  to  convince  myself  by  the  necessary  evidence  that  the 
facts  in  the  case,  the  indisputable  fact's  gathered  from  every  trust- 
worthy source,  sustain  the  theory  of  this  proposition  and  emphasize 
its  practical  importance  as  a  national  necessity.  And  it  is  also  well 
to  keep  in  mind  that  the  Supreme  Court  itself  has  very  seldom  been 
a  unit  in  decisions  upon  the  constitutional  interpretation  of  the 
commerce  clause,  and  the  legislative  department  could  hardly  be 
expected  to  be  unanimous  upon  a  question  upon  which  the  Court 
itself  has  as  a  rule  been  divided.*  In  nearly  every  case  which  has 
been  before  the  Court,  regarding  the  power  of  Congress  over  inter- 
state and  foreign  commerce,  at  least  one,  and  in  many  cases  several 
dissenting  opinions  have  been  filed.  The  Constitution  gives  the  Fed- 
eral government  specific  power  over  post-offices  and  post-roads,  over 
patents  and  copyrights,  over  bankruptcy,  and  over  commerce  in 
the  broadest  possible  sense  of  the  word.  By  implication,  and  not 
by  specific  enumeration,  Congress  has  established  a  system  of 
lighthouses   and   erected   custom-houses,    has   authorized    a    coast 

*  James  S.  Rogers,  on  the  Exclnsiveness  of  the  Power  of  Congress  over  Interstate  and 
Foreign  Commerce,  in  the  American  I^aw  Register,  September  and  October,  1905. 

12 


survey  and  a  survey  of  rivers  and  harbors,  has  erected  a  bank 
and  developed  our  national  banking  system,  and  by  decisions  of 
the  Supreme  Court  under  the  commerce  clause  Congress  has 
assumed  power  and  control  over  railways,  telegraphs,  express 
companies,  and  even  over  lottery-tickets. 

Insurance  a  The  Constitution  has  met  our  needs  in  the  past  and 

Part  of  the  ^-^j^  without  question,  meet  our  needs  in  the  future. 
Merchant.  Interpreted,  as  it  has  been,  in  a  broad  and  liberal  spirit, 
there  is  every  reason  to  hope  that  the  plain  necessities 
of  the  situation  will  justify  a  favorable  opinion  if  one  should  be 
rendered  by  the  Supreme  Court  in  the  case  of  insurance.  I 
have  no  patience  with  mere  hair-splittings  over  the  possible 
meanings  of  words,  the  more  so  as  a  rational  consideration  of 
the  subject  makes  mere  vSpeculative  considerations  needless.  That 
insurance  in  everyday  language  is  an  element  and  instrumentality 
of  commerce  is  established  by  every  treatise  on  commercial  law 
and  usage,  by  every  dictionary  of  commerce,  and  by  the  concensus 
of  public  opinion  which  I  have  taken  pains  to  secure  upon  this 
point.  Insurance  is  to-day,  as  it  has  been  from  time  immemorial, 
a  part  of  the  law  merchant  of  the  principal  commercial  nations, 
and  in  every  important  country  except  ours  insurance  is  the 
subject  of  regulation  by  the  national  or  supreme  government.  I 
rely  with  confidence  upon  the  theory  of  broad  constitutional  con- 
struction in  this  as  in  all  matters  of  doubtful  constitutionality 
which  vitally  affect  our  national  welfare. 

Insurance  In  the  admirable  and  never-to-be-forgotten  words 

Constitution,  of  Chief  Justicc  Marshall :  '*To  say  that  the  intention 
of  the  instrument  must  prevail;  that  this  intention 
must  be  collected  from  its  words  ;  that  its  words  are  to  be  understood 
in  the  sense  in  which  they  are  geiierally  used  by  those  for  whom  the 
instrument  was  inteiided ;  that  its  provisions  are  neither  to  be 
restricted  into  insignificance  nor  extended  to  objects  not  compre- 
hended in  them  nor  contemplated  by  its  framers,  is  to  repeat  what 
has  already  been  said  more  at  large  and  is  all  that  can  be  necessary." 
And  in  passing  upon  the  constitutionality  of  the  law  creating  a 
United  States  bank,  Marshall  gave  utterance  to  words  which  have 
been  so  often  repeated  that  they  have  become  an  axiom  in  our 
constitutional  history,  namely:     "Let  the   end   be  legitimate,  let 

13 


it  be  within  the  scope  of  the  Constitution,  and  all  means  which  are 
appropriate,  which  are  plainly  adapted  to  that  end,  which  are  not 
prohibited,  but  consistent  with  the  letter  and  spirit  of  the  Constitu- 
tion, are  constitutional."  When  we  consider  the  enormous  extent 
of  insurance,  how  it  affects  every  commercial  and  private  interest, 
how  it  enters  every  home  from  one  end  of  the  land  to  the  other, 
how  it  sustains  individual  effort,  enhances  individual  credit  and 
provides  security  against  possible  contingencies  not  to  be  guarded 
against  by  any  other  means  yet  devised,  I  question  if  the  ingenuity 
of  man  could  invent  or  design  another  method  so  completely  within 
the  spirit  of  our  nationality  and  an  interest  of  such  supreme  import- 
ance to  the  people  of  this  land. 

National  vs.  A   Federal   insurance  law  will    not    deprive    the 

^  ^  **  States  of  any  rights  specifically  reserved  to  them 
under  the  tenth  amendment.  The  States,  under  the  bill  intro- 
duced, will  retain  all  the  rights  and  powers  over  their  own 
corporations  which  constitutionally  belong  to  them,  but  the  bill  will 
put  an  end  to  the  multiform  system  of  State  supervision  and  control 
over  insurance  corporations,  which  has  no  justification  in  any  sound 
theory  of  constitutional  rights  or  in  any  common-sense  conception 
of  State  duty.  The  bill  will  put  an  end  to  interstate  chaos  and 
terminate  an  intolerable  condition  of  affairs  jeopardizing  the 
interests  and  at  times  the  very  existence  of  companies  transacting 
interstate  business.  The  bill  will  establish  insurance  companies 
upon  a  national  basis  and  give  to  the  business  a  national  character. 
The  bill  will  bring  insurance  companies  engaged  in  interstate 
business  within  the  power  and  control  of  the  Federal  government 
and  provide  a  system  of  supervision,  examination  and  control, 
thorough,  exacting  and  complete.  The  bill  will  increase  the  value 
of  every  form  of  insurance,  materially  enhance  the  security  of  the 
policyholders,  and  broaden  the  field  of  business  operations  to  an 
extent  impossible  under  the  present  system  of  supervision  and 
control  by  some  fifty  different  States  and  Territories.  The  States 
will  continue  to  supervise  insurance  corporations  of  their  own 
creation,  but  they  will  be  deprived  of  power  to  supervise  corpora- 
tions of  other  States  and  to  legislate  regarding  them,,  chiefly  for 
the  purpose  of  raising  revenue  or  of  harassing  the  companies  by 
vexatious  statutory  requirements.  It  is  not  a  theory,  but  a  con- 
dition, which  confronts  the  companies  and  their  policyholders,  who 

14 


in  their  aggregate  capacity  represent  the  nation  and  not  individual 
States.  The  policyholder  is  primarily  and  chiefly  interested  in  the 
security  and  value  of  his  contract,  in  the  rate  of  premium  which  he 
pays,  and  in  the  safe  and  economical  administration  of  the  company 
with  which  he  insures.  It  is  not  a  question  with  him  whether  the 
company  is  located  in  the  particular  State  in  which  he  lives,  or  in 
any  other  State.  As  a  life  insurance  policyholder  living  to-day  in 
one  State,  he  may  to-morrow  live  in  another,  but  his  contract  of 
insurance  goes  with  him  and  protects  and  sustains  him  in  the  event 
of  calamity  or  loss.  It  is  not  a  theory  that  this  business  is  national 
in  extent  and  character,  but  an  incontrovertible  fact  readily  within 
the  comprehension  of  any  one  who  will  carefully  consider  the  vast 
extent  of  the  business  operations  and  the  true  character  of  insurance 
transactions.  It  is  upon  this  ground  that  the  advocates  of  Federal 
supervision  rest  their  arguments  and  anticipate  a  favorable  ruling 
from  the  Supreme  Court  in  the  event  of  the  constitutionality  of  a 
law  to  this  effect  being  brought  to  a  test. 

Conclusion.  This   great   interest   is   entitled  to  recognition  by 

the  Federal  government.  It  needs  the  goverment's 
prudent,  consistent  and  effective  supervision.  It  is  not  confined 
in  its  operations  even  to  the  limits  permitted  to  our  flag.  It  is 
inseparably  interwoven  with  our  national  prosperity  on  land  and 
sea.  Until  it  is  disposed  of  wisely  and  permanently  it  is  a  matter 
that  will  not  be  laid  at  rest. 


15 


APPENDIX  A. 

Under  date  of  September  ii,  1905,  I  addressed  the  following 
letter  of  inquiry  to  some  eight  thousand  associations  and  individuals 
throughout  the  United  States  : 

My  dear  Sir : 

In  his  last  annual  message*  President  Roosevelt  called  the  attention  of 
Congress  to  the  necessity  for  Federal  legislation  providing  for  the  regulation 
and  control  of  insurance  companies  transacting  interstate  and  international 
business.  In  compliance  with  an  increasing  demand  from  insurance  policy- 
holders and  others  interested  in  the  public  welfare,  I  introduced  into  the  last 
Congress  a  bill  to  this  effect,  providing  that  there  should  be  established  within 
the  Bureau  of  Corporations  a  Division  of  Insurance,  and  that  policies  of  insurance 
were  deemed  to  be  articles  of  commerce  and  instrumentalities  thereof.  The  bill 
was  introduced  too  late  to  secure  final  consideration,  but  the  demand  for  such 
a  measure  has  become  even  more  apparent  in  the  meantime,  and  I  expect  to  rein- 
troduce the  same,  possibly  with  slight  modifications,  into  the  Congress  which  is 
to  meet  in  December. 

The  bill  will  be  introduced  on  behalf  of  the  policyholders  of  all  American 
insurance  companies,  in  the  firm  belief  that  their  present  and  future  interests 
demand  the  additional  protection  of  a  Federal  statute  regulating  insurance  trans- 
actions between  the  States,  in  addition,  of^ourse,  to  such  supervision  and  regu- 
lation as  constitutionally  belong  to  the  States  from  which  the  companies  derive 
their  charters.  Furthermore,  that  by  eliminating  a  considerable  amount  of 
needless  State  supervision  the  following  important  benefits  are  expected  to 
result : 

1.  An  increase  in  the  security  of  the  policyholders. 

2.  A  decrease  in  the  expense  rate  and  the  cost  of  insurance. 

3.  A  decrease  in  the  burden  of  needless  taxation. 

4.  A  decrease  in  the  amount  of  clerical  labor  now  indispensable  to  meet 
the  requirements  of  some  fifty  States  and  Territories. 

5.  The  stamping  out  of  fraudulent  insurance  enterprises. 

6.  Adequate  national  protection  for  American  companies  transacting  bus- 
iness in  foreign  countries. 

Since  thus  far  interstate  insurance  transactions  have  not  been  brought 
within  the  scope  of  Congressional  action,  I  desire  to  secure  an  expression  of  views 

*  "  The  business  of  insurance  vitally  affects  the  great  mass  of  the  people  of  the  United 
States  and  is  national  and  not  local  in  its  application.  It  involves  a  multitude  of  transactions 
among  the  people  of  the  different  States  and  between  American  companies  and  foreign 
governments.  I  urge  that  the  Congress  carefully  consider  whether  the  power  of  the  Bureau 
of  Corporations  cannot  constitutionally  be  extended  to  cover  interstate  transactions  in 
insurance." — [December  6,  1904.] 

16 


c        ""^ 

from  the  interests  affected  by  such  a  measure,  and  I,  therefore,  take  ^e  liberty 
of  troubling  you  with  a  few  questions  to  which  I  would  like  to  have  you  reply 
either  YES  or  NO,  as  the  case  may  be,  together  with  any  additional  comments 
of  your  own  which  you  may  wish  to  make  upon  the  matter. 

If  entirely  convenient,  kindly  fill  in  and  return  to  me  the  attached  blank 
in  the  enclosed  stamped  envelope  and  accept  in  advance  my  sincere  thanks  for 
your  courtesy  and  cooperation  in  my  effort  to  secure  a  comprehensive  expression 
of  qualified  public  opinion  upon  a  matter  vitally  affecting  the  welfare  of  the 
American  people. 

I  am, 

Very  truly  yours, 

JOHN  F*.  DRYDBN. 


Federal  Regulation  of  Insurance  Companies. 

Question  i .  Do  you  endorse  the  suggestion  of  President  Roosevelt,  that 
insurance  companies  engaged  in  interstate  insurance  business  should  be  regu- 
lated by  and  brought  under  the  control  of  the  Federal  government  ? 

Question  2.  Do  you  hold  the  insurance  business  to  be  a  national  rather 
than  a  local  interest,  and  properly  entitled  to  the  solicitude  and  care  of  the 
national  government? 

Question  3.  As  a  matter  of  personal  opinion,  do  you  hold  the  business 
of  insurance  to  be  commerce,  or  an  integral  and  indispensable  element  of 
commerce,  in  the  sense  in  which  this  term  is  used  in  everyday  language  ? 

Question  4.  Are  you  in  any  way  apprehensive  that  it  would  be  inex- 
pedient or  inadvisable  to  increase  the  power  of  the  Federal  government  to  the 
extent  implied  in  the  regulation  of  insurance  by  Congress  ? 


In  reply  to  Question  i — "Do  you  endorse  the  suggestion  of 
President  Roosevelt,  that  insurance  companies  engaged  in  inter- 
state insurance  business  should  be  regulated  by  and  brought  under 
the  control  of  the  Federal  government?" — out  of  7,454  answers, 
6,581  were  favorable,  or  88.3  per  cent,  of  all  the  letters  received. 
By  principal  States  or  geographical  divisions,  the  results  were  as 
follows  : 

Summary  of  Replies  to  Question  1. 

Total         Answers 
Replies      Yes  No 

New  England  States .  741  575  163 

New  York,  New  Jersey  and  Pennsylvania  2,491  2,213  266 

Southern  States 1,108  928  172 

North  Central  States 2,624  2,402  206 

Rocky  Mountain  and  Pacific  Coast  States  490  463  26 

Totals 7,454    6,581       833        40  88.3 

17 


Not 

Per  Cent. 

Specified 

Yes 

3 

77.6 

12 

88.8 

8 

83.8 

16 

91.5 

I 

94.5 

The   returns   by   individual    States    and   Territories   were    as 
follows  : 

Replies  to  Question  1  by  States  and  Territories: 


Total 
Replies 

65 

8 

27 

193 

113 

122 

23 


Auswers 

No 


Alabama 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

District  of  Columbia 133 

Florida 31 

Georgia 116 

Hawaii 2 

Idaho 12 

Illinois 429 

Indiana 177 

Indian  Territory .    .  6 

Iowa : 287 

Kansas 180 

Kentucky 82 

Louisiana 63 

Maine 53 

Maryland 113 

Massachusetts 460 

Michigan 249 


Minnesota 
Mississippi 
Missouri  , 
Montana  . 
Nebraska  . 
Nevada  .  . 
New  Hampshire 


146 

35 
220 

18 
195 

33 


New  Jersey 203 

New  Mexico 8 

New  York 1,321 

North  Carolina 52 

North  Dakota 21 

Ohio 488 

Oklahoma 10 

Oregon 52 

Pennsylvania 967 

Rhode  Island 

South  Carolina 

South  Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

"West  Virginia 

Wisconsin 

Wyoming 


38 
35 
24 
76 
no 

13 
35 
93 
53 
38 
208 
17 


Yes 
61 

7 

24 

189 

106 

90 

17 

118 

27 

102 

I 

12 

392 

156 

6 

269 

170 

61 

51 

45 

95 

352 

232 

135 
31 

192 
16 

180 

I 

26 

182 

6 

^156 

43 

18 

446 

9 

49 

875 
34 
23 
20 
66 

93 
10 
28 
65 
51 
36 
192 
15 


Totals 7,454    6,581 


3 
4 
7 
31 
6 

15 
4 

14 


37 
21 

17 

9 

20 

II 

8 

17 
106 

15 
9 
4 

26 
2 

14 

7 
20 

2 
161 

8 

3 
38 

I 

3 
85 

4 
12 

3 
.  8 

16 
3 
7 

27 
2 
2 

14 
2 

833 


Not        Per  Cent. 
Specified        Yes 

93.8 

87.5 
88.9 

97.9 
93.8 

73.8 

73-9 

88.7 

87.1 
87.9 
50.0 

100. o 
91.4 
88.1 

100. o 
93-7 
94-5 
74.4 
81.0 

84.9 
84.1 

76.5 
93-2 
92.5 
88.6 

87.3 
88.9 

92.3 
loo.o 

78.8 
89.7 

75 -o 

87.5 
82.7 

85.7 
91.4 
90.0 
94.2 
90-5 
89.5 
65.7 
83.3 
2  86.8 

I  84.5 

76.9 
80.0 

1  69.9 
96,2 
94.7 

2  92.3 
88.2 

4^       ssii 


18 


In  reply  to  Question  2 — "Do  you  hold  the  insurance  business 
to  be  a  national  rather  than  a  local  interest,  and  properly  entitled 
to  the  solicitude  and  care  of  the  national  government?" — out  of 
7,454  answers,  6,543  were  favorable,  or  87.8  per  cent,  of  all  the 
letters  received.  By  principal  States  or  geographical  divisions  the 
results  were  as  follows  : 

Summary  of  Replies  to  Question  2. 

Total  Answers  Not        Per  Cent. 

Replies      Yes  No     Specified        Yes 

New  England  States 741  570  139  32  75.7 

New  York,  New  Jersey  and  Pennsylvania  2,491  2,197  229  65  88.2 

Southern  States i,io8  922  163  23  83.2 

North  Central  States 2,624  2,394  189  41  91.2 

Rocky  Mountain  and  Pacific  Coast  States  490  460  24  6  93.9 

Totals 7,454    6,543       744       167  87.8 

In  reply  to  Question  3 — *' As  a  matter  of  personal  opinion,  do 
you  hold  the  business  of  insurance  to  be  commerce,  or  an  integral 
and  indispensable  element  of  commerce,  in  the  sense  in  which  this 
term  is  used  in  everyday  language?" — out  of  7,454  answers,  5,300 
were  favorable,  or  71.  i  per  cent,  of  all  the  letters  received.  By 
principal  States  or  geographical  divisions,  the  results  were  as 
follows : 

Summary  of  Replies  to  Question  3. 

Total         Answers  Not       Per  Cent. 

Replies      Yes  No     Specified       Yes 

New  England  States 741  425  213  103  57.4 

New  York,  New  Jersey  and  Pennsylvania  2,491  1,795  437  259  72.0 

Southern  States 1,108  788  231  89  66.7 

North  Central  States 2,624  1.955  429  240  74.5 

Rocky  Mountain  and  Pacific  Coast  States  490  337  93  60  68.8 

Totals 7,454    5,300  1,403        751  71. 1 

In  reply  to  Question  4 — *  *  Are  you  in  any  way  apprehensive 
that  it  would  be  inexpedient  or  inadvisable  to  increase  the  power 
of  the  Federal  government  to  the  extent  implied  in  the  regulation 
of  insurance  by  Congress?" — out  of  7,454  answers,  6,047,  ^^  ^^-^ 
per  cent.,  were  in  the  negative,  or,  in  other  words,  favorable  to  the 
theory  of  Federal  supervision  of  insurance.  This  question  was 
apparently  misunderstood  in  quite  a  number  of  cases  and  the  reply 
made  in  the  afiSrmative  where  the  negative  was  intended.  I,  how- 
ever, leave  the  results  as  they  were  received,  without  correction  : 

19 


Summary  of  Replies  to  Question  4. 

Total         Answers 
Replies       Yes       No 

New  England  States 741  179  528 

New  York,  New  Jersey  and  Pennsylvania  2,491  400  2,007 

Southern  States 1,108  222  846 

North  Central  States 2,624  344  2,232 

Rocky  Mountain  and  Pacific  Coast  States  490  49  434 

Totals 7,454   1.194    6,047      213  16.0 


Not 

Per  Cent. 

Specified 

Yes 

34 

24.1 

84 

16.I 

40 

20.0 

48 

13.I 

7 

lO.O 

APPENDIX  B. 


Analysis  of  Senate  Bill  3026. 

Organization  of  Bureau  of  Insurance. 

Section  14 — Article  of  Enactment. 

Bureau  of  Insurance  Established  in  Department  of 
Commerce  and  Labor. 

Comptroller  of  Insurance  in  Charge. 

Oath  of  Office  and  Bond. 

Deputy  Comptroller. 

Actuary. 

Clerks  and  Employees. 

Appointments  by  Secretary  of  Commerce  and  I^abor. 

Supervision  by  Secretary  of  Commerce  and  Labor. 

Interest  in  Insurance  Companies  Prohibited. 
Section  15 — Offices,  etc. 

Seal. 

Fees  to  go  to  Treasury.  Expenses  to  be  Paid  from 
Appropriation  for  Department  of  Commerce  and 
Labor. 

Reports  to  be  made  to  Congress. 

Scope  of  Act  and  Definition  of  Terms. 

Section  16 — Scope  of  Act. 

Corporations  Defined. 

Interstate  Insurance  declared  to  be  Interstate  Commerce. 

Single  State  Companies  Excepted. 

20 


Section  17 — Fraternal  Organizations  Excepted. 
Interinsurance  Exchange  Excepted. 

Administration  and  Regulation. 

Section  18 — Rules,  Regulations  and  Fees. 

Reports  Required  from  Insurance  Corporations. 

Penalty  for  Failure  to  Make  Reports. 

Valuation  and  Reinsurance  Reserve. 
Section  19 — Authority  and  Power  to  Make  Examinations. 

Authority  to  Employ  Special  Examiners. 

Aid  of  United  States  Courts. 

Examinations  upon  Request  of  State  Insurance  Officials. 

Companies  to  Pay  Expenses  of  Examinations. 

Fees  and  Charges  to  be  Paid  into  the  Treasury. 

Lrimitation  of  Visitorial  Powers. 

Requirements  of  Corporations  Transacting  Interstate  Insurance, 

Section  20 — Filing  of  Charter  and  other  Documents. 

List  of  Stockholders  or  Trustees  Required. 

Deposit  Required  to  be  Made. 

Certificate   of  Authority   to   Transact    Interstate    In- 
surance. 

Local  Attorneys  to  be  Appointed. 
Section  21 — When  Certificates  of  Authority  shall  be  Revoked. 

Proceedings  in  case  of  Receiverships. 

Hearing  to  be  Granted. 

American  Insurance  Companies  in  Foreign  Countries. 

Crimes,  Penalties,  Etc. 

Section  22 — Assistance  of  Attorney-General. 

Proceedings  by  Attorney- General. 

Penalty  for  Perjury. 

Penalty  for  Accepting  Bribes,  etc. 

Unauthorized  Insurance. 

Penalty  for  Unauthorized  Insurance. 

Repeal  of  Inconsistent  Laws. 

Transfer  of  Records. 

When  Act  Goes  into  Effect. 

21 


APPENDIX  C. 

Synopsis  of  Senate  Bill  3026,  Fifty-ninth  Congress,  First  Session. 

The  bill  contains  some  fifty  separate  provisions,  of  which  the 
first  thirteen  relate  to  the  organization  of  the  proposed  bureau  of 
insurance  in  the  Department  of  Commerce  and  Labor.  The  bureau 
is  to  be  in  charge  of  a  Comptroller  of  Insurance,  who  is  required  to 
furnish  a  bond  of  $100,000. 

In  nearly  all  essentials,  the  bill,  as  far  as  possible,  conforms  to 
the  organic  acts  establishing  other  departments  of  the  Federal  gov- 
ernment, but  in  particular,  the  national  bank  act.  There  is  to  be  a 
Deputy  Comptroller,  who  is  also  to  be  a  bonded  of&cer,  and  an 
actuary,  who  is  required  to  be  a  person  of  recognized  professional 
ability  and  experience.  The  general  supervision  and  control  of  the 
bureau  is  under  the  direction  of  the  Secretary  of  Commerce  and 
Labor,  and  all  fees  or  other  moneys  collected  are  required  to  be  paid 
into  the  treasury. 

The  Comptroller  must  make  an  annual  report  to  Congress, 
including  the  details  of  all  examinations  made  of  companies  during 
the  year,  together  with  a  complete  statement  of  the  receipts  and 
disbursements  of  the  bureau. 

The  provisions  of  the  act  apply  to  all  corporations,  associations 
or  partnerships  engaged  in  interstate  insurance  business,  who  make 
and  deliver  insurance  contracts  outside  the  State  of  incorporation  or 
origin  or  authority,  but  have  no  application  to  fraternal  societies  or 
organizations  carried  on  for  the  sole  benefit  of  members,  and  not  for 
profit.  Such  associations  or  societies  may  voluntarily  take  advantage 
of  the  act,  and,  after  complying  with  all  its  provisions,  become  duly 
authorized  by  the  Comptroller  to  transact  interstate  insurance. 

The  Comptroller  is  required  to  establish  rules  and  regulations 
and  reasonable  fees  for  conducting  the  business  of  insurance,  includ- 
ing annual  and  other  reports  to  be  made  by  companies.  The 
penalty  for  failure  to  make  or  transmit  any  report  or  statement 
of  fact  required  is  $100  for  each  day  of  delay. 

The  Comptroller  is  also  required  to  have  a  conservative  valua- 
tion made  of  the  business  of  life  companies,  or  determine  the  reinsur- 
ance reserve  of  other  companies,  upon  approved  methods  and  tables, 
and  by  such  a  standard  of  interest  as  may,  in  his  judgment  and 
discretion,  best  serve  the  purpose  to  determine  and  establish  the 
true  financial  conditions  and  attendant  liabilities  of  companies. 

22 


Authority  and  power  to  inquire  into  the  details  and  facts  of  the 
management  of  all  corporations  engaged  in  interstate  insurance  is 
given  to  the  Comptroller,  and  he  may  have  the  companies  examined 
by  special  examiners  whenever  necessary  or  expedient.  To  this  end 
he  may  invoke  the  aid  of  any  court  of  the  United  States,  to  require 
the  attendance  and  testimony  of  witnesses  and  the  production  of 
books,  papers  and  documents. 

Failure  to  obey  such  order  of  the  court  may  be  punished  as  a 
contempt  thereof.  It  is  also  provided  that  companies  may  be  inves- 
tigated by  the  Comptroller  upon  the  complaint  of  any  State  Com- 
missioner of  Insurance. 

The  actual  and  reasonable  expense  of  every  examination  or 
special  investigation  of  the  affairs  of  an  insurance  corporation  en- 
gaged in  interstate  insurance  must  be  paid  by  the  corporation  so 
examined.  All  charges  and  fees  for  making  such  examinations, 
however,  must  be  presented  in  the  form  of  an  itemized  bill,  approved 
by  the  Comptroller  of  Insurance,  and  the  amount  thereof  must  be 
paid  into  the  Treasury  of  the  United  States. 

Corporations  transacting  interstate  or  foreign  insurance  are 
specifically  exempted  from  making  any  other  or  separate  statements 
or  reports,  and  are  not  to  be  subject  to  any  visitorial  powers  or 
examinations  of  their  business  and  accounts  other  than  by  the  Comp- 
troller of  Insurance,  or  by  the  proper  authorities  of  the  State  of 
incorporation  or  origin. 

Corporations  engaged  in  the  business  of  insurance  in  more  than 
one  State  must  file  a  copy  of  their  charter  or  other  documents  of 
local  authority,  and  annually  publish  a  list  of.  their  stockholders  or 
trustees.  They  are  required  to  make  a  deposit  of  $100,000,  either 
with  the  Commissioner  of  Insurance  or  with  the  proper  official  of 
the  State  of  incorporation  or  origin. 

After  these  requirements  have  been  met  to  the  satisfaction  of 
the  Comptroller,  a  certificate  of  authority  and  power  to  transact 
interstate  insurance  shall  be  issued,  whereby  such  corporations 
are  authorized  to  transact  business  in  any  State,  Territory  or 
district  of  the  United  States,  without  further  supervision  or 
regulation  than  by  the  Comptroller  of  Insurance  or  the  duly 
authorized  official  of  the  State  of  incorporation  or  origin.  Pro- 
vision is  made  for  conditions  under  which  the  certificates  of 
authority  shall  be  revoked  and  for  proceedings  in  case  of  receiver- 
ship. 

23 


APPENDIX    D. 

59TH    CONGRESS  _.  /Z 

1ST    SESSION  S^     ^020 


IN  THE  SENATE  OF  THE   UNITED  STATES. 

January  15,  1906. 

Mr.  Dryden  introduced  the  following  bill,  which  was  read  twice  and  referred 
to  the  Committee  on  the  Judiciary. 


A  BILL 

To  amend  an  Act  entitled  ' '  An  Act  to  establish  the  Department  of  Commerce 
and  Labor,"  approved  February  fourteenth,  nineteen  hundred  and 
three,  being  chapter  five  hundred  and  fifty-two  of  the  United  States 
Statutes,  enacted  by  the  Fifty-seventh  Congress. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  in  Congress  assembled^  That  the  Act  entitled  "An  Act  to 
establish  the  Department  of  Commerce  and  Labor,"  approved  February  four- 
teenth, nineteen  hundred  and  three,  be  amended  by  adding  thereto  the 
following : 

"  Sec.  14.  That  there  shall  be  in  the  Department  of  Commerce  and  Labor 
a  division  to  be  called  the  Bureau  of  Insurance,  which  shall  be  charged  with 
the  execution  of  this  and  all  other  laws  that  may  be  passed  by  Congress  for  the 
supervision  and  regulation  of  the  business  of  insurance  among  the  several 
States.  The  Bureau  of  Insurance  shall  be  in  charge  of  an  officer  to  be  called 
the  Comptroller  of  Insurance,  who  shall  be  appointed  by  the  President,  by  and 
with  the  advice  and  consent  of  the  Senate.  He  shall  hold  his  office  for  the 
term  of  four  years,  unless  sooner  removed  by  the  President.  He  shall  receive 
an  annual  salary  of  dollars,  to  be  paid  in  monthly  instalments.     The 

Comptroller  of  Insurance  shall,  within  fifteen  days  from  the  time  of  notice  of 
his  appointment,  take  and  subscribe  the  oath  of  office  ;  and  he  shall  give  to  the 
United  States  a  bond  in  the  penalty  of  one  hundred  thousand  dollars,  to  be 
approved  by  the  Secretary  of  Commerce  and  Labor,  conditioned  for  the  faithful 
discharge  of  the  duties  of  his  office.  There  shall  also  be  in  the  Bureau  of 
Insurance  a  Deputy  Comptroller  of  Insurance,  who  shall  be  entitled  to  an 
annual  salary  of  dollars,  to  be  paid  in  monthly  instalments,  and  he 

shall  possess  the  power  and  perform  the  duties  attached  by  law  to  the  office  of 
the  Comptroller  during  a  vacancy  in  the  office  or  during  the  absence  or  inability 
of  the  Comptroller.  The  Deputy  Comptroller  shall  also  take  the  oath  of  office 
prescribed  by  the  Constitution  and  laws  of  the  United  States,  and  shall  give  a 
like  bond  in  the  penalty  of  fifty  thousand  dollars.     There  shall  also  be  in  said 

24 


Bureau  of  Insurance  an  actuary,  who  shall  be  selected  for  his  knowledge,  skill, 
and  practical  experience  in  actuarial  duties,  and  who  shall  be  a  person  of 
established  reputation  and  qualification,  and  who  shall  aid  and  assist  the  Comp- 
troller of  Insurance,  in  the  capacity  of  an  actuary,  and  perform  the  usual  duties 
appertaining  to  his  ofl&ce.  There  shall  also  be  a  chief  clerk  to  the  Comptroller 
of  Insurance,  and  such  special  agents,  examiners,  clerks,  and  other  employees 
as  may  be  authorized  by  law  and  may  be  necessary  for  the  work  of  said  Bureau. 
All  ofiicers  and  employees  of  the  Bureau  of  Insurance  other  than  the  Comp- 
troller shall  be  appointed  by  the  Secretary  of  Commerce  and  Labor.  The  work 
of  the  Comptroller  of  Insurance  and  his  subordinates  shall,  in  all  respects,  be 
subject  to  the  supervision  of  the  Secretary  of  Commerce  and  Labor,  and  it  shall 
not  be  lawful  for  the  Comptroller  of  Insurance  or  the  Deputy  Comptroller,  or 
any  oflficial  or  employee  of  the  Bureau  of  Insurance,  either  directly  or  indirectly, 
except  as  a  policyholder,  to  be  interested  in  any  insurance  corporation,  associ- 
ation, or  partnership. 

"Sec.  15.  That  there  shall  be  assigned  to  the  Comptroller  of  Insurance, 
by  the  Secretary  of  Commerce  and  Labor,  suitable  office  rooms,  and  he  shall 
supply  said  Bureau  with  the  necessary  furniture,  stationery,  fuel,  light,  and 
other  proper  conveniences  for  the  transaction  of  the  business  of  said  Bureau. 
The  Comptroller  of  Insurance,  with  the  approval  of  the  Secretary  of  Commerce 
and  Labor,  shall  devise  a  seal  with  suitable  inscription,  a  description  of  which, 
with  the  certificate  of  approval  of  the  Secretary  of  Commerce  and  Labor,  shall 
be  filed  in  the  office  of  the  Secretary  of  State,  with  the  impression  thereof, 
which  shall  thereupon  become  the  seal  of  the  office  of  said  Comptroller  of 
Insurance.  Every  certificate  and  all  other  papers  issued  by  him  in  pursuance 
of  any  authority  conferred  on  him  by  law,  and  sealed  with  his  seal  of  office, 
shall  be  received  in  evidence  in  all  courts  of  law  and  equity  and  other  places. 
All  fees  or  other  moneys  collected  or  recovered  under  the  rules  and  regula- 
tions of  the  Comptroller  of  Insurance,  as  approved  by  the  Secretary  of 
Commerce  and  Labor,  shall  be  paid  monthly  into  the  Treasury  of  the  United 
States,  and  all  the  salaries  and  expenses  of  administering  this  law  shall  be  paid 
by  the  Treasurer  of  the  United  States  from  the  appropriation  for  the  Department 
of  Commerce  and  Labor.  The  Comptroller  of  Insurance  shall  annually  prepare 
for  the  Secretary  of  Commerce  and  Labor,  to  be  transmitted  by  him  to  Congress, 
a  report  containing,  in  reasonable  detail,  an  abstract  of  the  statistical  and  other 
reports  made  to  him  by  corporations,  associations,  and  partnerships,  subject  to 
the  provisions  of  this  Act,  together  with  a  summary  statement  of  the  insurance 
business  in  the  United  States,  properly  classified,  and  such  other  statements, 
information,  facts,  or  comments  relating  to  insurance  as  he  may  deem  to  be  of 
public  interest.  The  annual  report  of  the  Comptroller  of  Insurance  shall  also 
include  and  contain  the  rules  and  regulations  established  by  him,  and  approved 
by  the  Secretary  of  Commerce  and  Labor,  to  carry  out  the  intent  and  purposes 
of  this  Act,  and  the  facts  and  results  of  all  examinations  of  insurance  companies 
which  he  may  have  made  or  may  have  caused  to  be  made  during  the  preceding 
year,  together  with  a  complete  and  detailed  statement  of  the  receipts  and 
expenses  of  the  Bureau  of  Insurance  during  the  year  from  any  source  whatever. 

'*  SKC.  16.  That  the  provisions  of  this  Act  shall  apply  to  all  corporations, 
associations,  and  partnerships,   including  individual    underwriters  known  as 

25 


Lloyd's,  engaged  in  interstate  insurance  business,  or  who  make  and  deliver 
insurance  contracts  outside  of  the  limits  of  the  State  of  incorporation  or  organ- 
ization or  authority,  and  their  attorneys  in  fact,  and  all  such  are  hereby  declared 
and  held  to  be  engaged  in  interstate  or  foreign  commerce,  as  the  case  may  be. 
The  term  corporation,  wherever  used  in  this  Act,  shall  include  companies, 
associations,  societies,  partnerships,  and  individual  underwriters  engaged  in  the 
business  of  insurance,  or  in  any  of  its  branches,  and  duly  incorporated  or 
authorized  under  the  laws  of  the  United  States,  or  of  any  State,  Territory, 
District,  or  foreign  nation.  Policies  or  any  other  contracts  of  insurance  are 
hereby  deemed  and  declared  to  be  articles  of  commerce  and  instrumentalities 
thereof.  The  delivery  by  said  corporations  of  said  policies  or  contracts  of 
insurance  from  the  State,  Territory,  District,  or  country  of  incorporation  or 
origin  to  corporations  or  persons  resident  of  or  located  in  other  States,  Territories, 
Districts,  or  foreign  nations  ;  the  transmission  by  the  insured  from  such  other 
States,  Territories,  Districts,  or  foreign  nations  of  the  premiums  or  other  valu- 
able consideration  for  said  policies  to  the  home  office  of  the  company  in  an- 
other State,  Territory,  District,  or  foreign  nation,  are  hereby  declared  and 
deemed  to  be  transactions  in  interstate  or  foreign  commerce,  as  the  case  may 
be ;  but  the  provisions  of  this  Act  shall  not  apply  to  any  corporation  trans- 
acting the  business  of  insurance  exclusively  within  the  State,  Territory,  or 
District  of  its  creation. 

"Sec.  17.  That  this  Act  shall  have  no  application  to  any  corporation, 
society,  order,  or  voluntary  association  formed  or  organized  and  carried  on  for 
the  sole  benefit  of  its  members  and  their  beneficiaries,  and  not  for  profit,  having 
a  lodge  system  and  representative  form  of  government,  making  insurance  pro- 
vision for  the  payment  of  benefits  in  case  of  death,  sickness,  disability,  accident, 
or  old  age.  But  the  Comptroller  of  Insurance  shall  be  authorized  and  have 
power  to  determine  upon  the  facts  whether  the  corporation  or  association  or 
organization  is  in  fact  of  a  purely  religious,  charitable,  or  benevolent  character  : 
Provided,  That  any  such  corporation,  association,  society,  or  order  transacting 
fraternal  or  mutual  benefit  insurance  in  more  than  one  State  may  voluntarily 
take  advantage  of  this  Act,  and  after  complying  with  all  its  provisions,  and  with 
the  rules  and  regulations  of  the  Bureau  of  Insurance,  be  duly  authorized  by  the 
Comptroller  to  transact  interstate  insurance:  And  provided  further,  That  the 
provisions  of  this  Act  shall  not  apply  to  associations  known  as  interinsurance 
exchanges,  the  members  whereof  indemnify  one  another  against  loss  by  fire, 
organized  for  the  purpose  of  saving  expenses  and  diminishing  losses,  and  not 
for  personal  profit  or  gain  or  as  commercial  undertakings. 

"Sec.  18.  That  the  Comptroller  of  Insurance,  subject  to  the  approval  of 
the  Secretary  of  Commerce  and  Labor,  shall  from  time  to  time  fix  and  establish 
such  rules,  regulations,  and  reasonable  fees  for  conducting  the  business  of  the 
Bureau  and  for  carrying  out  the  provisions  of  this  Act  as  he  may  deem  neces- 
sary and  proper  for  securing  an  effective,  uniform,  and  economical  adminis- 
tration of  the  Bureau.  Said  rules  and  regulations  shall  provide  methods  and 
forms  for  annual  or  other  reports  to  the  Comptroller  of  Insurance  by  corporations 
transacting  interstate  or  foreign  insurance,  which  annual  or  other  reports  shall 
be  duly  attested  under  seal  by  such  corporations  and  sworn  to  by  the  president 
vice-president,  secretary,  or  some  other  officer  thereof  before  an  oflScial  duly 

26 


authorized  to  administer  oaths  who  is  not  an  officer  or  employee  of  the  corpora- 
tion reporting.  And  the  said  Comptroller  shall  forward,  in  December  of  each 
year,  to  every  corporation  authorized  under  this  Act  to  transact  interstate  insur- 
ance, or  its  agent  or  attorney,  the  necessary  blank  forms  for  the  annual  state- 
ments of  such  company,  which  shall  be  returned  to  the  Comptroller  on  or  before 
the  first  day  in  March  of  each  year,  signed  and  sworn  to  by  the  president,  vice- 
president,  or  secretary,  or,  if  a  foreign  company,  by  its  manager  or  proper 
representative  within  the  United  States,  showing  its  true  financial  condition  as 
of  the  next  preceding  thirty-first  day  of  December,  which  shall  include  a  correct 
and  detailed  statement  of  the  assets  and  liabilities  of  that  date,  the  amount  and 
character  of  business  transacted,  losses  sustained,  and  money  received  and 
expended  during  the  year,  and  such  other  information  as  the  said  Comptroller 
may  deem  necessary.  Every  corporation  transacting  interstate  or  foreign  insur- 
ance which  fails  to  make  and  transmit  any  report  or  information  or  statement 
of  fact  required  by  this  Act  shall  be  subject  to  a  penalty  of  one  hundred  dollars 
for  each  day  after  the  periods  therein  respectively  mentioned  that  it  delays 
to  make  and  transmit  its  report.  And  whenever  any  corporation  refuses  to  pay 
the  penalty  herein  imposed,  after  it  has  been  assessed  by  the  Comptroller  of 
Insurance,  the  Comptroller  shall  have  authority  to  recover  the  penalties  im- 
posed by  due  process  of  law,  but  he  may,  in  his  discretion,  extend  the  time  for 
making  such  report  for  a  period  not  exceeding  thirty  days.  All  sums  of  money 
collected  for  penalties  under  this  section  shall  be  paid  monthly  into  the  Treasury 
of  the  United  States.  It  shall  be  the  duty  of  the  Comptroller  of  Insurance  to 
require  of  each  corporation  transacting  interstate  insurance,  preliminary  to  the 
granting  of  a  certificate  of  authority  to  engage  thereafter  in  such  insurance 
among  the  States,  a  true  and  complete  statement  as  of  the  thirty -first  day  of 
December  next  preceding  of  all  policies  or  other  contracts  of  insurance  in  force, 
together  with  their  valuation  or  reinsurance  reserve,  made  or  determined 
according  to  the  laws  of  the  State,  Territory,  District,  or  foreign  nation  of  its 
incorporation,  origin,  or  authority,  and  annually  thereafter  the  Comptroller 
shall  cause  to  be  made,  by  and  under  the  direction  of  the  actuary  of  the  Bureau, 
a  true  and  complete  valuation  or  determination  of  the  reinsurance  reserve  of  all 
policies  or  contracts  of  insurance  in  force  with  any  corporation  subject  to  the 
provisions  of  this  Act,  upon  such  approved  tables  and  methods  and  by  such  a 
standard  of  interest  as  may  in  his  judgment  and  discretion  best  serve  the 
purpose  to  determine  and  establish  the  true  financial  condition  and  outstanding 
liabilities  of  the  same. 

"Skc.  19.  That  the  Comptroller  shall  have  authority  and  power  to 
inquire  into  the  details  and  facts  of  the  management  of  all  corporations  subject 
to  the  provisions  of  this  Act,  and  he  shall  keep  himself  informed  as  to  all 
business  matters  of  said  corporations,  and  he  shall  have  authority  and  poweu  to 
obtain  from  them  true  and  complete  information  and  facts  necessary  to  enable 
him  to  properly  perform  the  duties  and  carry  out  the  objects  for  which  this 
Bureau  of  Insurance  was  established.  And  he  shall  have  authority  and  power 
to  examine,  or  have  examined  by  the  Deputy  Comptroller  or  any  other  quali- 
fied employee  or  special  examiner  designated  for  the  purpose,  all  books, 
papers,  and  everything  pertaining  to  the  business  or  management  of  said 
corporation  at  any  or  all  times  when  he  may  deem  this  necessary  or  expedient ; 

27 


and  he  shall  have  the  power  to  require  the  attendance  and  testimony  of  wit- 
nesses and  the  production  of  books,  papers,  and  documents  relating  to  any 
matter  under  investigation.  And  to  that  end  he  may  invoke  the  aid  of  any 
court  of  the  United  States  to  require  the  attendance  and  testimony  of  witnesses 
and  the  production  of  books,  papers,  and  documents.  And  any  circuit  court  of 
the  United  States  within  the  jurisdiction  of  which  such  inquiry  is  carried  on 
ma}',  in  case  of  contumacy  or  refusal  to  obey  a  subpoena  issued  to  any  corpora- 
tion or  person  subject  to  the  provisions  of  this  Act,  issue  an  order  requiring 
such  corporation  or  person  to  appear  before  said  Comptroller  and  produce  books, 
papers,  and  documents,  if  so  ordered,  and  give  evidence  touching  the  matter 
of  inquiry  ;  and  any  failure  to  obey  such  order  of  the  court  may  be  punished 
by  such  court  as  a  contempt  thereof.  The  Comptroller  of  Insurance  shall  also 
investigate  any  complaint,  made  in  his  own  behalf,  or  forwarded  by  the  com- 
missioner, superintendent,  or  other  official  charged  with  the  execution  of  the 
insurance  laws  of  any  State,  Territory,  or  District,  at  the  request  of  such 
commissioner,  superintendent,  or  other  officials,  and  may  institute  any  inquiry 
on  his  own  motion  in  the  same  manner  and  to  the  same  effect  as  though 
complaint  had  been  made  ;  and  the  result  and  findings  of  such  examination  or 
investigation,  upon  having  been  approved  by  the  Secretary  of  Commerce  and 
Labor,  shall  be  communicated  without  undue  delay  to  the  commissioner, 
superintendent,  or  other  State  official  making  the  complaint  or  requesting  the 
investigation  to  be  made  :  Provided,  That  the  actual  and  reasonable  expense 
of  every  examination  or  special  investigation  of  the  affairs  of  an  insurance 
corporation  authorized  to  transact  interstate  insurance  under  the  provisions  of 
this  Act  shall  be  borne  and  paid  by  the  corporation  so  examined  :  A7id 
provided  further,  That  no  charge  shall  be  made  for  any  examination  of  an 
insurance  corporation  by  the  Comptroller  or  his  deputy  personally,  or  by  one 
or  more  of  the  regular  clerks  or  employees  of  the  Bureau,  except  for  necessary 
traveling  and  other  expenses.  All  charges  and  fees  for  making  any  examina- 
tion, and  all  charges  and  fees  against  an  insurance  corporation  by  an  attorney 
or  appraiser  of  the  Bureau  of  Insurance,  shall  be  presented  in  the  form  of 
an  itemized  bill  approved  by  the  Comptroller  of  Insurance ;  and  the  corpora- 
tion examined,  on  receiving  a  certified  copy  of  such  bill,  so  approved  and 
properly  audited,  shall  pay  the  amount  thereof  to  the  Comptroller  of  Insurance, 
to  be  paid  by  him  into  the  Treasury  of  the  United  States.  No  corporation 
examined  shall,  either  directly  or  indirectly,  pay,  by  way  of  gift,  credit,  or 
otherwise,  any  other  or  further  sum  to  the  Comptroller  or  Deputy,  or  any  clerk 
or  employee  of  the  Bureau  of  Insurance,  or  any  examiner,  for  extra  services,  or 
for  purposes  of  legislation,  or  on  any  other  pretense  whatsoever  :  Provided, 
That  no  corporation  transacting  interstate  or  foreign  insurance  shall  be 
required  by  any  other  than  the  State,  Territory,  or  District  of  its  incorporation 
or  origin  to  make  other  or  separate  statements  or  reports,  or  held  to  be  subject 
to  any  visitorial  powers  or  examination  of  its  business  and  accounts  other  than 
such  as  are  authorized  by  this  Act  or  as  are  within  the  constitutional  rights 
and  powers  of  the  State,  Territory,  or  District  of  incorporation  or  origin. 

"  Sec.  20.  That  every  corporation  transacting  interstate  or  foreign  insur- 
ance shall,  within  sixty  days  after  the  passage  of  this  Act,  and  every  corpora- 
tion hereafter  formed  shall,  before  engaging  in  interstate  or  foreign  insurance, 

28 


comply  with  this  provision  by  filing  with  said  Comptroller  a  certified  copy 
of  its  charter  and  by-laws  or  deed  of  settlement,  or  other  certificate  of  local 
authority  to  lawfully  transact  insurance  business,  together  with  an  ofiicially 
certified  copy  of  the  last  complete  statement  of  its  condition  and  affairs  as  filed 
in  the  office  of  the  superintendent,  commissioner  of  insurance,  or  other  author- 
ized official  of  the  State,  Territory,  District,  or  nation  of  its  incorporation  or 
origin,  and  a  certificate  under  the  seal  of  the  proper  officer  of  its  government, 
certifying  that  the  said  corporation  is  duly  authorized,  by  local  authority,  to 
engage  in  or  transact  the  business  of  insurance.  Every  insurance  corporation 
transacting  business  on  the  stock  or  share  plan  shall  cause  to  be  kept  at  all 
times  a  full  and  correct  list  of  the  names  and  residences  of  all  the  stockholders 
or  shareholders  in  the  company  and  the  number  of  shares  or  certificates  of 
stock  held  by  each  in  the  office  where  its  business  is  transacted  ;  and  every 
insurance  corporation  doing  business  on  the  mutual  plan  shall  cause  to  be  kept 
at  all  times  a  full  and  complete  list  of  the  names,  occupations,  and  residences 
of  all  the  trustees  duly  elected  and  responsible  for  the  management  of  said 
corporation.  A  copy  of  such  list,  as  of  the  thirty-first  day  of  December  of 
each  year,  after  December  thirty-first,  nineteen  hundred  and  five,  verified  by 
oath  of  the  president,  vice-president,  or  secretary  of  the  corporation,  shall  be 
transmitted  to  the  Comptroller  of  Insurance :  Provided ^  That  such  list  of 
stockholders  or  shareholders  or  trustees  shall  only  be  for  the  lawful  use  and 
information  of  the  Bureau  of  Insurance,  and  not  for  the  public  inspection,  or 
for  the  information  of  other  stockholders  or  shareholders  or  trustees  of  the 
company,  corporation,  or  association,  as  the  case  may  be.  Every  corporation, 
at  the  time  of  filing  the  copy  of  its  statement  as  aforesaid,  must  deposit  with 
the  Treasurer  of  the  United  States,  as  a  guaranty  for  the  faithful  performance 
of  its  contracts  of  insurance.  United  States  bonds  or  other  securities  satisfactory 
to  said  Comptroller,  or  as  subsequently  to  be  defined  by  law,  to  the  amount  of 
one  hundred  thousand  dollars :  Provided,  however.  That  the  Comptroller  of 
Insurance  may  accept,  in  his  discretion,  in  lieu  of  such  deposit,  a  certificate 
issued  under  the  seal  of  the  insurance  department  of  the  State,  Territory,  or 
District  of  incorporation  or  origin,  certifying  that  said  insurance  corporation 
has  deposited,  under  the  laws  of  the  State,  Territory,  or  District  of  its  incorpor- 
ation or  origin,  with  the  authorities  of  said  State,  Territory,  or  District,  cash  or 
securities  to  the  amount  of  one  hundred  thousand  dollars  for  the  protection  of 
its  policyholders.  If,  upon  a  careful  and  thorough  examination  of  the  facts, 
as  required  by  law,  and  of  any  other  facts  which  may  come  to  the  notice  of  the 
Comptroller  of  Insurance,  it  appears  to  his  satisfaction  that  such  corporation 
or  association  is  thereafter  lawfully  entitled  to  transact  the  business  of  inter- 
state and  foreign  insurance,  the  Comptroller  shall  issue  to  such  corporation  a 
certificate,  under  his  hand  and  official  seal,  that  such  corporation  has  complied 
with  all  the  provisions  required  to  be  complied  with,  and  that  such  corporation 
is  authorized  to  transact  such  business  in  any  State,  Territory,  or  District  of 
the  United  States.  And  every  corporation,  before  transacting  interstate  or 
foreign  insurance,  shall  appoint  in  each  State,  Territory,  or  District  in  which 
it  proposes  to  carry  on  business,  other  than  the  State,  Territory,  or  District  of 
incorporation  or  origin,  a  person  on  whom  process  of  law  may  be  served,  and  a 
certified  list  of  such  appointees  shall  be  filed  with  the  Comptroller  of  Insurance. 

29 


"Sec.  21.  That  whenever,  from  the  statements  and  reports  herein 
required,  or  from  any  other  information,  it  shall  appear  to  the  Comptroller  of 
Insurance  that  the  financial  condition  of  such  corporation,  doing  business  under 
this  Act,  is  impaired  or  unsafe,  it  shall  be  the  duty  of  the  said  Comptroller  of 
Insurance  to  order  such  corporation  to  make  good  its  financial  condition,  and 
if  this  be  not  done  within  sixty  days  after  such  order  is  given,  the  Comptroller 
of  Insurance  shall  revoke  the  certificate  of  authority  to  such  corporation  to 
transact  interstate  business  under  this  Act,  and  public  notice  thereof  shall  be 
given  in  such  manner  as  may  be  prescribed  in  the  rules  and  regulations  herein 
provided  for,  which  information  shall  also  be  transmitted  to  the  official  charged 
with  the  execution  of  the  insurance  laws  of  the  State,  Territory,  District,  or  foreign 
nation  where  such  corporation  was  organized.  The  securities  transferred  to  and 
deposited  by  any  insurance  corporation,  subject  to  the  provisions  of  this  Act,  with 
the  Treasurer  of  the  United  States,  as  hereinbefore  provided,  shall  remain  in  the 
custody  of  the  Treasurer  of  the  United  States  until  all  the  obligations  of  such 
corporation  that  have  arisen  out  of  interstate  or  foreign  insmrance  shall  have 
been  discharged  or  otherwise  terminated;  and  the  corporation  maintaining  such 
deposit  unimpaired  shall  be  entitled  to  receive  the  interest  thereon  as  it  accrues. 
Whenever  a  receiver  shall  be  appointed  in  a  court  of  the  United  States,  of  com- 
petent authority,  and  shall  present  to  the  Comptroller  of  Insurance  a  duly 
certified  copy  of  such  appointment,  together  with  an  order  of  said  court  for  the 
delivery  to  said  receiver  of  the  bonds  or  securities  held  by  the  Treasurer  of  the 
United  States  as  a  guaranty  for  the  contracts  of  such  corporation,  in  order  that 
they  may  be  distributed  among  the  beneficiaries  in  accordance  with  the  princi- 
ples of  equity,  said  Comptroller  shall  apply  to  the  Treasurer  for  said  securities 
and  the  Treasurer  shall  deliver  them  to  the  receiver  appointed  by  the  court.  If 
such  depositor  shall  appear  and  desire  to  be  heard,  the  Comptroller  shall  grant 
a  hearing  to  the  parties,  at  such  time  and  place  as  he  may  limit  and  appoint, 
and  upon  such  hearing  shall  determine  the  question  upon  which  the  parties 
shall  have  taken  issue,  and  from  this  decision  either  party  may,  within  ten 
days,  appeal  to  the  Secretary  of  Commerce  and  Labor,  whose  determination 
shall  be  final  and  conclusive.  It  shall  also  be  the  duty  of  the  Comptroller  of 
Insurance  to  keep  himself  advised  of  the  legislation  and  executive  action  of 
foreign  nations  affecting  the  business  of  corporations  transacting  insurance 
under  this  Act  in  foreign  countries,  and  whenever  he  shall  consider  such  legis- 
lation or  executive  action  to  be  injurious  to  the  business  in  such  foreign  nations 
of  corporations  transacting  insurance  under  this  Act,  he  shall  lay  all  the  facts 
before  the  Secretary  of  Commerce  and  Labor  for  transmission  to  the  Department 
of  State  for  such  action  thereon  as  will  extend  over  corporations  under  this  Act 
all  the  rights,  protections,  and  facilities  as  are  within  the  power  of  the  Govern- 
ment of  the  United  States. 

"Sec.  22.  That  the  Comptroller  of  Insurance  may,  whenever  he  deems 
it  necessary,  call  upon  the  Attorney-General  for  legal  counsel  and  such  assist- 
ance as  may  be  required  to  enforce  the  provisions  of  this  Act.  If,  upon  exam- 
ination or  other  evidence  exhibited  or  made  known  to  him,  he  shall  be  satisfied 
that  any  corporation  transacting  interstate  insurance,  as  defined  by  this  Act, 
shall  have  violated  any  provision  of  this  Act,  he  shall  report  the  facts  to  the 
Attorney-General,  who  shall  institute  proceedings  against  the  same.    Any  willful 

30 


false  swearing  in  regard  to  any  report  or  statement  of  fact  required  by  the 
provisions  of  this  Act  shall  be  perjury,  and  shall  be  punished  as  such,  according 
to  the  laws  of  the  State,  Territory,  or  District  in  which  the  corporation  is 
incorporated  or  organized  ;  and  every  officer,  employee,  or  examiner  of  the 
Bureau  of  Insurance  who,  upon  any'  pretence  whatever,  receives  any  fee  or 
award  for  his  services,  except  what  is  allowed  to  him  by  law  or  by  the  rules  and 
regulations  of  the  Bureau,  shall  forfeit  his  ofl&ce  and  be  otherwise  punished  by 
the  imposing  of  a  fine  of  not  more  than  five  hundred  dollars  or  by  imprisonment 
for  not  more  than  six  months,  or  by  both.  It  shall  not  be  lawful  for  any 
corporation  or  party  which  has  not  complied  with  the  provisions  of  this  Act  to 
insure  any  risk  or  issue  any  policy  on  property  of  any  kind  located  beyond  the 
limits  of  the  State,  Territory,  or  District  under  whose  laws  said  corporation  or 
party  was  incorporated  or  organized,  or  upon  the  life  or  lives  of  any  person  or 
persons,  or  upon  contingencies  happening  in  futvu'e  to  person,  life,  property,  or 
estate,  where  the  insured  is  not  a  resident  of  the  State,  Territory,  or  District  in 
which  said  corporation  or  party  was  incorporated  or  organized;  and  it  shall  not 
be  lawful  for  any  person  to  act  as  agent  or  solicitor,  or  in  any  other  manner, 
for  any  corporation  transacting  business  under  this  Act  until  all  the  provisions 
of  this  law  shall  have  been  complied  with  and  evidenced  by  the  Comptroller's 
certificate  of  authority.  Any  person  or  persons  violating  this  or  any  other 
provision  of  this  Act  shall  be  deemed  guilty  of  a  misdemeanor,  and  shall,  upon 
conviction  thereof  in  any  district  court  in  the  United  States  within  the  jurisdic- 
tion of  which  such  offense  was  committed,  be  subject  to  a  fine  not  exceeding 
one  thousand  dollars  for  each  offense. 

"  Sec.  23.  That  all  duties  and  powers,  authority  and  jurisdiction  now 
imposed  aud  conferred  upon  the  Commissioner  of  Corporations  by  the  Act  of 
Congress  of  February  fourteenth,  nineteen  hundred  and  three,  relating  to 
insurance  companies,  shall  not  thereafter  be  imposed  upon  or  exercised  by  the 
Commissioner  of  Corporations.  And  all  Acts  or  parts  of  Acts  inconsistent  with 
this  Act,  and  so  far  as  inconsistent,  are  hereby  repealed  ;  and  all  books,  papers, 
and  documents  and  correspondence  whatsoever,  now  in  the  office  of  the  Com- 
missioner of  Corporations,  relating  to  the  business  of  insurance,  shall,  on 
demand,  be  delivered,  and  transferred  to  the  Comptroller  of  Insurance,  and  be 
and  remain  in  his  charge  and  custody. 

**  Sec.  24.     That  this  Act  shall  be  in  force  from  and  after  its  passage." 


^      OF  THE 

UNIVERSITY 

OF 


31 


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